Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On November 26, 2021, the Company issued
$2.75 billion aggregate principal amount of the 2026 Notes pursuant to the Indenture at an issue price of 100% of the principal amount
of the 2026 Notes and $2.5 billion aggregate principal amount of the 2028 Notes pursuant to the Indenture at an issue price of 100% of
the principal amount of the 2028 Notes. The Notes were sold in a private placement to (1) persons reasonably believed to be “qualified
institutional buyers” in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”)
and (2) outside the United States to persons who are not “U.S. persons” (as defined in Rule 902 of Regulation S
under the Securities Act) in compliance with Regulation S under the Securities Act.
The net proceeds from the offering were used to
make an intercompany loan to DISH Network pursuant to a Loan and Security Agreement dated November 26, 2021 (the “Intercompany
Loan”) between the Company and DISH Network in order to finance the potential purchase of wireless spectrum licenses and for general
corporate purposes, including the buildout of wireless infrastructure. The Company may make additional advances to DISH Network under
the Intercompany Loan. The Intercompany Loan is secured by (i) the cash proceeds of the loan and (ii) an interest in any wireless
spectrum licenses acquired using such proceeds. In certain cases, DISH Network wireless spectrum licenses (valued based upon a third-party
valuation) may be substituted for the collateral. The Intercompany Loan is not included as collateral for the Notes, and the Notes are
subordinated to the Company’s existing and certain future unsecured notes with respect to certain realizations under the Intercompany
Loan and any collateral pledged as security for the Intercompany Loan.
The 2026 Notes bear interest at a rate of 5.25%
per annum and mature on December 1, 2026, and the 2028 Notes bear interest at a rate of 5.75% per annum and mature on December 1,
2028. Interest on the Notes will be payable semi-annually on June 1 and December 1 of each year, commencing June 1, 2022,
to the holders of record of such Notes at the close of business on May 15 and November 15, respectively, preceding such interest
payment date. The Notes are the Company’s secured senior obligations and, pursuant to the Security Agreement, dated as of November 26,
2021 (the “Security Agreement”) among the Company, the Guarantors and the Collateral Agent, are secured by security interests
in substantially all existing and future tangible and intangible assets of the Company and the Guarantors on a first priority basis, subject
to certain exceptions. The guarantees in respect of the Notes rank equally with all of the Guarantors’ existing and future unsubordinated
indebtedness and are effectively senior to such Guarantors’ existing and future obligations to the extent of the value of the assets
securing the Notes.
The Indenture contains covenants that will limit
the Company’s ability and, in certain instances, the ability of certain of the Company’s subsidiaries, to, among other things:
(i) incur additional debt; (ii) pay dividends or make distributions on the Company’s capital stock or repurchase the Company’s
capital stock; (iii) make certain investments; (iv) create liens or enter into sale and leaseback transactions; (v) enter
into transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer and sell assets. These
covenants include certain exceptions.
The
Company may, at its option, redeem all or any portion of either series of Notes prior to, in the case of the 2026 Notes, June 1,
2026 (the date that is six months prior to the maturity of the 2026 Notes (the “2026 Par Call Date”)), and in the case of
the 2028 Notes, December 1, 2027 (the date that is twelve months prior to the maturity of the 2028 Notes (the “2028 Par
Call Date”)) on not less than 10 and not more than 60 days’ prior notice mailed to the holders of the Notes to be redeemed.
The Notes will be redeemable at a price equal to the principal amount of the Notes being redeemed, together with accrued and unpaid interest,
if any, to the date of redemption and a “make-whole” premium calculated under the Indenture. At any time on or after the 2026
Par Call Date or the 2028 Par Call Date, as applicable, the Company may redeem the applicable series of Notes, in whole at any time or
in part from time to time, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of redemption. At any time and from time to time during the 36-month period following the issue date of the Notes, the Company may
redeem up to 10% of each series of Notes during each twelve-month period commencing with the issue date of the Notes (including
any additional notes issued under the Indenture which are fungible with the applicable series of Notes) at a redemption price equal to
103% of the principal amount thereof plus accrued and unpaid interest and additional interest, if any, to, but not including, the applicable
redemption date. Further, at any time prior to December 1, 2024, the Company may also redeem up to 35% of each series of Notes at
a purchase price equal to, in the case of the 2026 Notes, 105.250% of the principal amount of the 2026 Notes redeemed, and in the case
of the 2028 Notes, 105.750% of the principal amount of the 2028 Notes redeemed, in each case together with accrued and unpaid interest,
if any, to the date of redemption with the net cash proceeds from certain equity offerings or capital contributions.
The Indenture provides for customary events of
default, including: nonpayment, breach of the covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure
to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If any event of default occurs and is continuing
under the Indenture, the trustee or the holders of at least 25% in principal amount of the then outstanding Notes issued pursuant to the
Indenture may declare all the Notes issued pursuant to the Indenture to be due and payable immediately, together with interest, if any,
accrued thereon.
The description set forth above is qualified in
its entirety by the Indenture filed herewith as Exhibit 4.1.
Copies of the Security Agreement and the Intercompany
Loan are attached hereto as Exhibits 4.2 and 4.3, respectively, and are incorporated herein by reference.